Up 27% in 12 Months, Meet 1 Vanguard ETF That Might Be a No-Brainer Buy in March

In the past decade, the S&P 500 (^GSPC 0.61%) has generated a fantastic above-average return of 304% (as of March 11). This has been driven partly by the tremendous performance of dominant technology enterprises, most notably those in the “Magnificent Seven” group. What’s striking is that these days, the S&P 500 represents about half of the entire global equity market.

Investors might be concerned that too much of their portfolio is concentrated in American businesses. If your aim is to diversify geographically, it’s worth taking a look at this Vanguard exchange-traded fund (ETF) that might be a no-brainer buy in March. It has produced a total return of 31%, including dividends, in the past 12 months.

Image source: Getty Images.

Are the U.S. stock market’s best days behind it?

One of the biggest worries right now is the S&P 500’s valuation. The cyclically adjusted price-to-earnings (CAPE) ratio is currently at levels not seen since the dot-com bubble period. While a high valuation doesn’t automatically prevent investors from achieving adequate returns in the future, it might force a rethink of where to allocate capital.

What if the market becomes uneasy about the high valuations of U.S. stocks? What if earnings growth slows going forward? And what if investors at large decide that it’s best to diversify into international stocks?

While it has always been a good idea historically to bet on the American economy, the smartest investors must consider ways that this thesis can be challenged. Whether it’s intense competition with China related to artificial intelligence (AI), heightened geopolitical turmoil, stringent U.S. trade policy, or the troubling rise of sovereign debt levels, capital could start to flow away from the U.S. stock market in the future.

Of course, things that look unsustainable can go on for longer than anyone can imagine. Nonetheless, it’s worthwhile to think through what’s possible.

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NASDAQ: VXUS

Vanguard Total International Stock ETF

Today’s Change

(-0.94%) $-0.73

Current Price

$76.74

Key Data Points

Day’s Range

$76.59 - $78.20

52wk Range

$54.98 - $84.28

Volume

29K

Consider adding international exposure to diversify your portfolio

Here’s where the Vanguard Total International Stock ETF (VXUS 0.94%) comes into the picture. For starters, its expense ratio of 0.05% is compelling. This is a low-cost vehicle to gain instant non-U.S. exposure.

It contains almost 8,700 different stocks that are all located outside of the U.S. The biggest countries represented are Japan, the U.K., China, Canada, and Taiwan. Both developed economies and emerging markets are included.

All sectors have a presence in the ETF, but the technology sector’s share of 15.6% is much lower than what you see in the S&P 500. The three largest positions are Taiwan Semiconductor Manufacturing, ASML, and Samsung Electronics.

For those investors seeking to build a sufficiently diversified portfolio, it’s time to consider the Vanguard Total International Stock ETF. Perhaps its performance in the future will surprise to the upside.